Definition
A formal performance evaluation conducted once a year in which an employee's achievements, performance against objectives, development progress, and goals for the coming year are discussed and documented. The annual review often informs decisions about pay, promotion, and development.
UK Context
Annual reviews remain common in UK organisations, though many are supplementing them with more frequent check-ins. There is no legal requirement to conduct annual reviews, but they provide documentation that can support fair processes for pay decisions, promotions, and capability management. Under the Equality Act 2010, the review process must be applied fairly and consistently.
Best Practices
- Prepare thoroughly by reviewing objectives, feedback, achievements, and development activities throughout the year
- Avoid the recency bias by considering performance across the entire review period, not just recent months
- Document agreed outcomes, new objectives, and development plans in writing for both parties
Frequently Asked Questions
Are annual reviews still relevant?
Annual reviews remain a useful formal milestone for reflecting on overall performance and setting goals. However, research from the CIPD suggests they work best when combined with regular feedback throughout the year, rather than being the only performance conversation.
How should annual reviews link to pay decisions?
Many organisations separate the performance discussion from the pay discussion to encourage open and development-focused conversations. Where they are linked, the criteria for pay awards should be transparent and consistently applied across the organisation.